Tencent wins Xiamen government contract for 0.01 Yuan

The low winning bid for the contract to provide Internet-based cloud services to a government department has drawn attention

Tencent Holdings, a provider of Internet value added services in China has won a contract to provide Internet-based cloud services to a government department in the coastal city of Xiamen for 0.01 Yuan. The bid amount equals to about one-seventh of a U.S. cent which has raised concerns about the validity of the bid.

It has been reported that the project to provide cloud-hosting services from the Xiamen Information Center had a budget of 4.95 million Yuan ($717,000). The contract attracted bids from five parties, including all three of China’s state-run telecom carriers and a local Xiamen company. The other four bids ranged from 1.7 million Yuan from China Telecom to 3.09 million Yuan from China Unicom.

Industry observers noted that 0.01 Yuan is the lowest possible bid, and that such low offers are relatively common in emerging industries like cloud services.

An industry observer commented:

It’s quite apparent that (Tencent’s) intention was to win the bidding first, and then to get later profitable value-added services through this initial contract.

For them, several million yuan is just a marketing cost.

Some experts from the legal community have reportedly said that such low bidding may be invalid or require an explanation from the bidder in an effort to avoid substandard products or lower the risk of failure to meet contractual obligations.